New Zealand Economy

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NZ Labour would restrict foreign property purchases

By Leith van Onselen New Zealand’s opposition Labour Party has announced that, if elected, it would emulate Australia and restrict foreign purchases of real estate to new dwellings, as well as implement a capital gains tax on second homes: Labour’s proposal to ban all foreign non-residents except Australians from buying existing houses is aimed at

7

Is the NZ housing market faltering?

By Leith van Onselen UBS has today released a short note arguing that the recent slowdown in growth of New Zealand housing finance commitments is unlikely to stem growth in house prices or prevent the Reserve Bank of New Zealand’s (RBNZ) from implementing loan-to-value ratio (LVR) speed limits on new lending: As we wait for

21

Does the RBNZ risk losing its independence?

By Leith van Onselen Yesterday I noted how the Reserve Bank of New Zealand (RBNZ) was soon likely to implement speed limit controls on high loan-to-value (LVR) mortgage lending that would limit growth of 80%-plus LVR mortgages to 12%, significantly below the 30% growth experienced over the past year. I also noted how such meaures

15

RBNZ to impose tight controls on high LVR lending

By Leith van Onselen From Interest.co.nz’s Bernard Hickey today comes news that New Zealand’s central bank and prudential regulator, the Reserve Bank of New Zealand (RBNZ), is about to implement speed limit controls on high loan-to-value (LVR) mortgage lending: Two banking sources have told me the Reserve Bank advised them informally on Friday that it

16

NZ Finance Minister argues to free-up land supply

By Leith van Onselen New Zealand’s Finance Minister, Bill English, has today firmly argued against urban containment policies that are contributing to the current blowoff in the Auckland house price bubble. From Interest.co.nz: Finance Minister Bill English has spoken out against “compact cities” saying that they drive up house prices. In a speech to the

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Economists still blind on the housing supply-side

By Leith van Onselen Interest.co.nz has today posted an interesting article quoting Westpac Bank economists on the Auckland housing market, where the stratified median house prices hit a record $634,000 in June (see next chart). From Interest.co.nz: The rapidly heating Auckland housing market is being driven primarily by buyers’ expectation of capital gains – not

23

Auckland house prices go bananas

By Leith van Onselen The Real Estate Institute of New Zealand (REINZ) has released its June house price results, which revealed ongoing strong growth in supply restricted Auckland, but slower growth elsewhere. In the month of June, the national stratified median price was flat at $415,200, whereas prices in Auckland – New Zealand’s biggest city

23

Kiwis raid retirement accounts for housing

By Leith van Onselen The New Zealand housing market appears to be getting out of control. Amid rapid price growth, particularly in supply restricted Auckland and Christchurch:     Increasing mortgage debt: Rising average mortgage size: And near record low inventory: Young Kiwis are now raiding their retirement accounts – known as Kiwisaver – in

4

RBNZ signals loan limits are nigh

From the RBNZ: The current overheated housing market is a threat to future financial stability and the Reserve Bank is seriously considering the use of macro-prudential tools to help moderate house price inflation pressures. Macro-prudential policy is intended to be used as needed, to reduce significant but transitory risks affecting the broad financial system. “With

25

Tensions build over RBNZ LVR limits

By Leith van Onselen Tensions are building between the New Zealand National Government and the Reserve Bank of New Zealand (RBNZ) over the RBNZ’s plan to implement limits on high loan-to-value ratio (LVR) lending in a bid to allow it greater flexibility to lower interest rates and take pressure off the overvalued kiwi dollar without

13

RBNZ warns on housing risks

By Leith van Onselen The Reserve Bank of New Zealand (RBNZ) today released its June Statement of Monetary Policy (SoMP) following its decision to leave the official cash rate (OCR) on hold at 2.5% (see next chart). The SoMP contains quite a lot of discussion on the New Zealand housing market and the likelihood of

7

RBNZ loads the gun on macro-prudential tools

By Leith van Onselen The Reserve Bank of New Zealand (RBNZ) governor, Graeme Wheeler, yesterday delivered a speech to the Auckland Institute of Directors suggesting that it is just days away from launching loan-to-value ratio (LVR) limits on mortgage lending, in order allow the RBNZ greater flexibility to lower interest rates and take pressure off

4

RBNZ targets high LVR lending

By Leith van Onselen Following last week’s Memorandum of Understanding between the Reserve Bank of New Zealand (RBNZ) and the New Zealand Government, the RBNZ has today outlined how it will use macro-prudential policy tools to target high loan-to-value (LVR) mortgage lending – i.e. mortgages where the deposit or equity in the property is less

4

S&P downgrades NZ banks

By Leith van Onselen Back in March, Standard and Poors (S&P) released a report warning about the increasing risk of a New Zealand property crash and noting that Australia’s Big Four banks, which own New Zealand’s Big Four, would be on the hook in the event that they needed to be bailed-out (my emphasis): In

1

RBNZ readies macroprudential arsenal

From Banking Day: The Reserve Bank of New Zealand has agreed a memorandum of understanding with Finance Minister Bill English that will give the bank the power to limit low equity mortgages as soon as July. …”These new tools…can promote financial stability by helping to build capital buffers and reduce incentives for speculative behaviour, which can contribute

9

Unlike Australia, NZ Budget tackles housing affordability

By Leith van Onselen While the major political parties continue to ignore Australia’s highly unaffordable housing, the 2013 New Zealand Budget, released earlier today, announced a variety of measures aimed at boosting supply and improving overall housing affordability. Measures announced included: Introduction of the Housing Accords and Special Housing Areas Bill, which will enable the

3

IMF warns on NZ housing market

By Leith van Onselen New Zealand house prices surged again in April, with the national stratified median price hitting a record $412,500, but prices in New Zealand’s biggest city – Auckland – falling slightly from last month’s record to $595,500 (see next chart). House price growth across New Zealand is accelerating (see next chart). Nationally,

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RBNZ implements macroprudential mortgage limits

By Leith van Onselen It has been well documented on this site that the New Zealand housing market is, once again, facing bubble-like conditions, with prices in its two major markets – Auckland and Christchurch – rising strongly on the back of low interest rates, increasing credit availability, and tightened supply (see next chart). A

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Mad NZ property price boom

By Leith van Onselen It’s a sad day for younger non-home owning New Zealanders, with stratified median house prices hitting in excess of $400,000 nationally and $600,000 in Auckland for the first ever time in March, according to data released today by the Real Estate Institute of New Zealand (REINZ). Nationally, New Zealand house prices

8

Fitch warns on NZ property bubble

Fresh from Fitch this morning: Fitch Ratings-Sydney/Singapore-08 April 2013: Fitch Ratings says that challenges are increasing for New Zealand’s major banks with strong asset growth and fierce price competition potentially leading to asset bubbles. This in turn may impact bank financial strength and place negative pressure on Viability Ratings (VR). In a report published today,

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RBNZ: fix housing supply & temper credit

By Leith van Onselen The Reserve Bank of New Zealand (RBNZ) yesterday gave a speech (below) entitled Perspectives on housing, which provided a useful overview of some of the factors driving New Zealand’s housing market and monetary/prudential policy. Below are some key extracts. On housing and the New Zealand economy: The RBNZ notes that New

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The war over Auckland land supply hots up

By Leith van Onselen The war over Auckland land supply has continued this week, with the new Minister for Housing, Dr Nick Smith, uping the ante on his promise to smash Auckland’s urban growth boundary (called the “Metropolitan Urban Limit” or MUL). Regular readers might recall that the Auckland City Council had moved to shift

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RBNZ cries wolf on mortgage lending

By Leith van Onselen The Reserve Bank of New Zealand (RBNZ) today released its quarterly Statement on Monetary Policy (SoMP), where it kept the official cash rate unchanged at 2.5% and signalled that it would remain on hold until 2014 due, in part, to the ongoing drought, which is expected to lop up to 1%

17

NZ mortgage war heats up

By Leith van Onselen The competition for mortgage lending is heating up in New Zealand. Last month, government-owned KiwiBank announced that it would drop its six month fixed mortgage rate to just 4.79%, which is reportedly the lowest mortgage rate offered by a New Zealand bank for “many decades”. And today, ASB (owned by the

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HSBC sees New Zealand improving

HSBC is out with a quick note on the latest NZ GDP figures, although according to them they are “so late that they are mostly history”: New Zealand’s GDP was weaker than expected, rising by only +0.2% in Q3 (market had +0.4%). Downward revisions meant y-o-y growth slowed to +2.0% (market had +2.5%). Growth was held back